Lightning Network and its great importance to Bitcoin network

[Felicity_Tide]

Recently, after reading and learning about certain technical terms that fall under Bitcoin, I never had a reason to regret choosing this path. Reading about Bitcoin for the past month has literally been one of the best things that has happened to me.

Lightning Network (LN) has been a very popular term I always come across in people's posts and replies on BTT, but I didn't pay much attention to it as I thought it would be somewhat complex to learn. To my greatest surprise, LN happens to be one of the most interesting parts of Bitcoin I have read about, as I now understand why Bitcoin enthusiasts talk so much about it. I literally found myself laughing after I found out why Bitcoin enthusiasts use it, but also found it difficult to believe at first.

Lightning Network
The Lightning Network (LN) allows users of a digital wallet to transfer BTC to another without any fees. This is achieved by adding a second layer to the Bitcoin network to enable transactions between parties off the blockchain(off-chain transactions). Two parties that want to use the LN simply create a payment channel that enables them to deposit a certain amount of BTC into a multi-signature address. Opening a payment channel happens on the blockchain for complete transparency, thereby allowing both parties to see that a certain amount of BTC has been deposited.

A balance sheet simply holds the records of both parties' deposited amounts, so when any individual chooses to send a certain amount, values are deducted from one and added to the other. This transaction can continue as there is no limit because it happens off the chain. The payment channel can be closed by any of the parties just by broadcasting the signed balance sheet to the Bitcoin network for validation. If miners are able to validate the transaction, the deposited BTC would be shared according to how it was recorded on the balance sheet, thereby forming a single transaction on the blockchain.

LN was meant to address Bitcoin scalability, thereby processing faster and lower cost transactions on the Bitcoin network. There have been speculations that the LN method isn't secure, as it exposes people's BTC to theft, but I hope to use it someday since I haven't come across any articles of stolen BTC due to LN. Please pardon my excitement, but I think LN is really cool.

[_act_]

The Lightning Network (LN) allows users of a digital wallet to transfer BTC to another without any fees.

Yes but this is not totally true, this is only true if you are sending to the person that you open a channel with directly. If you are sending to other people that does not open channel with you, you will pay small fee. The more of other people channels that you use for the payment, the more the fee. Because of the limited in the maximum amount that you can send in using each channel, that is why lightning is not to good for huge payments. Just good to use it for small payments.

LN was meant to address Bitcoin scalability, thereby processing faster and lower cost transactions on the Bitcoin network. There have been speculations that the LN method isn't secure, as it exposes people's BTC to theft, but I hope to use it someday since I haven't come across any articles of stolen BTC due to LN. Please pardon my excitement, but I think LN is really cool.

If you want to use lightning wallet, there are many lightning wallets. You can go through this thread to see some of the good lighting wallets

Lists of open-source bitcoin lightning wallets

[Upgrade00]

The Lightning Network (LN) allows users of a digital wallet to transfer BTC to another without any fees. This is achieved by adding a second layer to the Bitcoin network to enable transactions between parties off the blockchain(off-chain transactions).

You can be charged by route nodes that connects channels. I say can cause for some it's free while for others you pay a fee.

This transaction can continue as there is no limit because it happens off the chain. The payment channel can be closed by any of the parties just by broadcasting the signed balance sheet to the Bitcoin network for validation. If miners are able to validate the transaction, the deposited BTC would be shared according to how it was recorded on the balance sheet, thereby forming a single transaction on the blockchain.

There are limits to how much you can send based on how much you funded the channel with and how much you've spent from it.

Also what you described is an uncooperative close. Usually if both parties are online, both can sign for the channel to be closed and the funds will be transferred onchain.

[ABCbits]

To my greatest surprise, LN happens to be one of the most interesting parts of Bitcoin I have read about,

While LN development focused on Bitcoin network, the technology can be used on altcoin and you could even perform atomic swap between 2 coins (e.g. LTC and BTC) on LN.

The Lightning Network (LN) allows users of a digital wallet to transfer BTC to another without any fees.

Aside from what @_act_ said, you still need to pay fee for on-chain Bitcoin transaction which is needed when opening or closing the LN channel.

[Wind_FURY]

OP, I'm not trying to offend you nor am I accusing you, but the post looks like it was copied somewhere and merely pasted. Plus the title states LN and, "its great importance to Bitcoin network", but the part with "great importance" is not included in your post.

BUT I ask everyone. What is actually the Lightning Network's great importance? Perhaps we truly haven't discovered what it is, or what it could be?

[bitmover]

Recently, after reading and learning about certain technical terms that fall under Bitcoin, I never had a reason to regret choosing this path. Reading about Bitcoin for the past month has literally been one of the best things that has happened to me.

Lightning Network (LN) has been a very popular term I always come across in people's posts and replies on BTT, but I didn't pay much attention to it as I thought it would be somewhat complex to learn. To my greatest surprise, LN happens to be one of the most interesting parts of Bitcoin I have read about, as I now understand why Bitcoin enthusiasts talk so much about it. I literally found myself laughing after I found out why Bitcoin enthusiasts use it, but also found it difficult to believe at first.

Personally  I think lighting network still needs lots of improvements.

Thee interface is  very complicated,  even veteran bitcoin users get confused with terms like inbound capacity, outbound capacity, channels, routes...

I think there are some wallets which are making LN easier, but I don't think LN is ready to be used for large amounts and by most people

[BlackHatCoiner]

The idea of a second layer that allows instant Bitcoin transactions with near-zero fees is extremely appealing, but the truth is that in practice, things are much worse in lightning. In Bitcoin, you can be a user by simply creating an address and checking its balance on a lightweight client. That's all you need to do. If you run a node and do that, even better, but it isn't a prerequisite.

In lightning, not only does running a full node become a requirement, but you need to run it 24/7. You can't pass a lightning address and go offline. Payments won't arrive if you're offline. Then, there's another partner to account for. What if they go offline? Or what if they decide to close their channel with you? This rises the overall transaction cost. Lastly, you can't be confident that your payments always complete. There may be routing failures on the way. This is another important distinction with on-chain transactions, where you can always be certain it will confirm eventually.

So, in my opinion, it's not that the network lacks improvements. It's fundamentally structured in such a way that it's difficult or impractical for it to spread and grow.

[Floxynice]

The Lightning Network (LN) allows users of a digital wallet to transfer BTC to another without any fees.

I am also a total noob in Bitcoin, but I have developed great interest in it and I have been reading alot. With what i read about LN, transactions on the lightning network are not entirely free. When using the lightning network, only two transactions are recorded on the blockchain and they are:
1. While opening the payment channel on the lightning network and
2. Closing the payment channel on the lightning network.
Although transactions in-between are feeless, there are fees attached to the two transactions stated above which are recorded on the blockchain.

Then, there's another partner to account for. What if they go offline? Or what if they decide to close their channel with you? This rises the overall transaction cost. Lastly, you can't be confident that your payments always complete. There may be routing failures on the way. This is another important distinction with on-chain transactions, where you can always be certain it will confirm eventually.

I read somewhere that the lightning network has a mechanism that protects its users from fraud initiated by one party in the payment channel. For example, if there are two parties in the payment channel who both made a specific deposit, then one party tries to back out without keeping to his own part of the bargain, the whole amount deposited will transferred to the other party who didn't try to cheat. This was supposed to serve as a punishment to those who try to cheat.

How do I reconcile what I read with your statement above. I will be glad if you clarify me on this issue, I am new here and still learning.

[Felicity_Tide]

The idea of a second layer that allows instant Bitcoin transactions with near-zero fees is extremely appealing, but the truth is that in practice, things are much worse in lightning. In Bitcoin, you can be a user by simply creating an address and checking its balance on a lightweight client. That's all you need to do. If you run a node and do that, even better, but it isn't a prerequisite.

In lightning, not only does running a full node become a requirement, but you need to run it 24/7. You can't pass a lightning address and go offline. Payments won't arrive if you're offline. Then, there's another partner to account for. What if they go offline? Or what if they decide to close their channel with you? This rises the overall transaction cost. Lastly, you can't be confident that your payments always complete. There may be routing failures on the way. This is another important distinction with on-chain transactions, where you can always be certain it will confirm eventually.

So, in my opinion, it's not that the network lacks improvements. It's fundamentally structured in such a way that it's difficult or impractical for it to spread and grow.

With all these technical aspects being mentioned, it's surprising how so many people boast about it(LN) whenever there is congestion. Could it be that so many people have mastered it so well?

And again, can such complexity which somehow breaks the rules of Blockchain technology affect the BTC chain at some point?.

Personally  I think lighting network still needs lots of improvements.

Thee interface is  very complicated,  even veteran bitcoin users get confused with terms like inbound capacity, outbound capacity, channels, routes...

I think there are some wallets which are making LN easier, but I don't think LN is ready to be used for large amounts and by most people

Pardon me for asking this, but do you have any idea of what is hindering the further development of LN, or is the Bitcoin community satisfied with the one on ground?.

I think you're missing out something from this part that you said transfer without any fee, lightning network is not a zero fee rate to use for making transaction despite is a second layer transaction, it is rather made subsidized, which means it has a lower fee rate and not a zero fee rate to use it, it addresses the issues of scalability, affordability and transaction speed all together.

Thanks for pointing that out. NOTED!

[bitmover]

Personally  I think lighting network still needs lots of improvements.

Thee interface is  very complicated,  even veteran bitcoin users get confused with terms like inbound capacity, outbound capacity, channels, routes...

I think there are some wallets which are making LN easier, but I don't think LN is ready to be used for large amounts and by most people

Pardon me for asking this, but do you have any idea of what is hindering the further development of LN, or is the Bitcoin community satisfied with the one on ground?.

I think we need additional second layer solutions in my opinion. We already have liquid as well. It is easier to use, but more centralized.
I think other solutions will show up.

[HeRetiK]

With all these technical aspects being mentioned, it's surprising how so many people boast about it(LN) whenever there is congestion. Could it be that so many people have mastered it so well?

Probably rather the opposite, for most cases. It's interesting to try out at first, but the deeper you dive into it, the more apparent its flaws become. I'm slightly more optimistic than BlackHatCoiner though in that I believe that those flaws are not necessarily fundamental.

And again, can such complexity which somehow breaks the rules of Blockchain technology affect the BTC chain at some point?.

That's the neat part, it can't. While changes on the BTC base-layer affect LN, LN development does not affect the BTC base-layer.

Pardon me for asking this, but do you have any idea of what is hindering the further development of LN, or is the Bitcoin community satisfied with the one on ground?.

There's plenty of development going on in the LN ecosystem, it's just something that takes time. In the end you not only have a complex problem but also multiple implementations with slightly varying feature sets that still need to retain compatibility with one another.

[ABCbits]

The idea of a second layer that allows instant Bitcoin transactions with near-zero fees is extremely appealing, but the truth is that in practice, things are much worse in lightning. In Bitcoin, you can be a user by simply creating an address and checking its balance on a lightweight client. That's all you need to do. If you run a node and do that, even better, but it isn't a prerequisite.

In lightning, not only does running a full node become a requirement, but you need to run it 24/7. You can't pass a lightning address and go offline. Payments won't arrive if you're offline. Then, there's another partner to account for. What if they go offline? Or what if they decide to close their channel with you? This rises the overall transaction cost. Lastly, you can't be confident that your payments always complete. There may be routing failures on the way. This is another important distinction with on-chain transactions, where you can always be certain it will confirm eventually.

So, in my opinion, it's not that the network lacks improvements. It's fundamentally structured in such a way that it's difficult or impractical for it to spread and grow.

With all these technical aspects being mentioned, it's surprising how so many people boast about it(LN) whenever there is congestion. Could it be that so many people have mastered it so well?

If they boast about LN without mentoing on-chain TX fee to open/close LN channel, then IMO they're not master or expert of LN.

And again, can such complexity which somehow breaks the rules of Blockchain technology affect the BTC chain at some point?.

No. If on-chain TX (which created for LN purpose) violate Bitcoin protocol/rule, it's simply ignored and won't affect Bitcoin network.

[BlackHatCoiner]

I read somewhere that the lightning network has a mechanism that protects its users from fraud initiated by one party in the payment channel.

It's called a penalty. When your partner tries to cheat, they publish one of the earlier commitment transactions (not the final), which has been revoked. Revocation is an anti-cheat mechanism. Lightning nodes monitor the blockchain to check if their partners have published a revoked commitment transaction, and if they have, they can claim all the channel's funds before the timeout; if you fail to claim the funds before that time, which can be hundreds to thousands of blocks, the other partner's attempt to cheat will be successful.

You can issue penalties without running a full node, by using watchtowers, but this is trust-requiring. Essentially, you're entrusting that someone else will do the task described above, who's running a full node.

[Wind_FURY]

Recently, after reading and learning about certain technical terms that fall under Bitcoin, I never had a reason to regret choosing this path. Reading about Bitcoin for the past month has literally been one of the best things that has happened to me.

Lightning Network (LN) has been a very popular term I always come across in people's posts and replies on BTT, but I didn't pay much attention to it as I thought it would be somewhat complex to learn. To my greatest surprise, LN happens to be one of the most interesting parts of Bitcoin I have read about, as I now understand why Bitcoin enthusiasts talk so much about it. I literally found myself laughing after I found out why Bitcoin enthusiasts use it, but also found it difficult to believe at first.

Personally  I think lighting network still needs lots of improvements.

Thee interface is  very complicated,  even veteran bitcoin users get confused with terms like inbound capacity, outbound capacity, channels, routes...

The UX does need improvement, but the developers have done it that way to build it with decentralization as the main feature of the network. It could be debated that a hub-and-spoke model would have been better to bootstrap the network before making it more decentralized later. But that could also have its own complications because it's probably much harder to decentralize a network than centralizing one.

I think there are some wallets which are making LN easier, but I don't think LN is ready to be used for large amounts and by most people

Mainly custodial.

[Floxynice]

You can issue penalties without running a full node, by using watchtowers, but this is trust-requiring. Essentially, you're entrusting that someone else will do the task described above, who's running a full node.

Could this trust be compared to entrusting someone running Bitcoin full node for securing the network while only sending and receiving Bitcoin transactions? If yes, is it a big risk not to run a lightning full node while using the LN.

[BlackHatCoiner]

Could this trust be compared to entrusting someone running Bitcoin full node for securing the network while only sending and receiving Bitcoin transactions? If yes, is it a big risk not to run a lightning full node while using the LN.

It's not the best analogy, because in the case with using a third-party full node to sync your wallet, there is practically no incentive to cheat and serve you false transactions. It's not in their interests, unless you're running a big company, like a popular anonymous swap service; it's the kind of service I'd expect such behavior to be incentivized, but if you were the operator of that service, you'd be running your own node in the first place.

If your partner is the watchtower without your knowledge, theoretically they can take your money without you noticing. This can't happen in a lightweight Bitcoin wallet.

[Floxynice]

Could this trust be compared to entrusting someone running Bitcoin full node for securing the network while only sending and receiving Bitcoin transactions? If yes, is it a big risk not to run a lightning full node while using the LN.

It's not the best analogy, because in the case with using a third-party full node to sync your wallet, there is practically no incentive to cheat and serve you false transactions. It's not in their interests, unless you're running a big company, like a popular anonymous swap service; it's the kind of service I'd expect such behavior to be incentivized, but if you were the operator of that service, you'd be running your own node in the first place.

If your partner is the watchtower without your knowledge, theoretically they can take your money without you noticing. This can't happen in a lightweight Bitcoin wallet.

Thank you for your explanation, although you are going more deep. I believe with time, I will have a full understanding of what you are saying.

[thecodebear]

Yes LN is indeed of great importance to Bitcoin. It's how everyday bitcoin payments are done. Though as some people have pointed out, as great as LN is, there are tradeoffs and potential pain points for some users. Ideally in a decade or two, by the time bitcoin payments start taking off, we'll not only have LN but also other layer 2 networks so that people can choose the best option for their own use case, and ideally wallets that wrap all these L2 solutions so that a user can simply choose which option to use.

But yeah for lots of use cases LN is pretty incredible. As long as you know a few basic facts like you need to be online to receive (in general I don't think that would be a problem for most use cases) and you need inbound capacity to receive (more problematic for some use cases) and I guess you want to have backups of your channels transactions. Or for some people (honestly probably most people will choose this) it'll just be better to treat LN as a checking account at a bank and use a custodial LN wallet and not worry about any of these things.

[BlackHatCoiner]

Thank you for your explanation, although you are going more deep. I believe with time, I will have a full understanding of what you are saying.

You're welcome. If you're interested to learn more about LN, I fully recommend this book: https://github.com/lnbook/lnbook.

and I guess you want to have backups of your channels transactions.

This is a great problem, actually. Bitcoin users are used to backing up a seed phrase, and now you're asked to do frequent (automatic) backups, which are a lot more probable to fail with a disk corruption.

Or for some people (honestly probably most people will choose this) it'll just be better to treat LN as a checking account at a bank and use a custodial LN wallet and not worry about any of these things.

It's just that relying on custodial LN to save the day is hypocritical. The entire purpose of lightning is to respect self-custody, and most people simply disregard this, reasonably; setting up a lightning wallet properly is a pain in the neck.

[xmonkeyx]

The Bitcoin network would definitely benefit from using the Lightning Network as a second-layer protocol to enable faster and more effective transactions, which could lower transaction costs and times as well as increase network scalability by allowing more transactions to be completed. Because the Lightning Network processes the majority of transactions, it offers increased security and privacy to Bitcoin users.
However, before the Lightning Network is widely used, a number of possible security flaws must be fixed. This is still in the development stage.